Expert predicts 600b yuan tax cut 2012

China has scope for a 600 billion yuan ($95 billion) tax cut this year and more effort should be put into lowering the rate for value added taxes, an expert said.

The actual fiscal deficit this year will be 1.07 trillion yuan, which is a combined result of more expenditure and less revenue, according to Gao Peiyong, head of the Finance and Trade Economics Institute under the Chinese Academy of Social Sciences.

Unlike the policy focus to increase spending in previous years, this year's "proactive fiscal policies" will incline more to tax cuts, Gao said.

He estimated that the scale of tax cuts will be more than half of the fiscal deficit volume, or at least 600 billion yuan.

The tax reduction will allow China to optimize its tax structure, Gao said, explaining that there will be more direct taxes instead of indirect taxes, and levies on residents instead of those mainly on corporate tax payers.

Less indirect tax should start with lower rate of value added taxes, which is the main body of indirect taxes, he said.